viernes, 19 de septiembre de 2014

What Francisco Rodriguez does not say about Venezuela's possible default

In  this link: we can read the arguments of Francisco Rodriguez against the article of Ricardo Hausmann and Miguel Angel Santos on the possible default of Venezuela. Says Rodriguez:
Venezuela does not need to default. It needs to start charging a realistic price for foreign exchange. It also needs to do the same thing for the other goods and services – such as gasoline and electricity – that it sells for near-zero prices. If Venezuela charged a reasonable price for its foreign exchange, it would cut its budget deficit (which reached 17.2 per cent of GDP last year) by 10 points of GDP; doing away with the gasoline subsidy would reduce it by another 7 points. Defaulting, in contrast, would free up resources for at most 1.5 points of GDP. This, in a nutshell, is the essence of the problem in a country that has carried out an external adjustment but failed to adjust internal relative prices”.
Of course, this makes much sense in financial terms but Rodriguez does not address the other side of the coin, the ideological prison in which the Venezuelan regime has chosen to place itself.  Gasoline and electricity prices will not go up because, if they do, the government would be abandoning its ideological posture as a socialist, populist, revolutionary regime married to the poor. A similar reasoning applies to the price of foreign exchange, artificially set so that large segments of the population receive dollar handouts from the government. Rodriguez consciously refrains from mentioning a very substantial source of losses or the government, namely the 300,000 barrels of oil per day going at subsidized prices to Cuba and the Caribbean mini-states, a drain that costs Venezuela some $5 billion per year. Rodriguez does not mention this absurd give away because he knows the regime cannot dispense with it and keep its “revolutionary” identity in the region.
The crux of the matter seems to be, therefore, that the regimen will rather default than losing its ideological identity. This has little to do with economic rationality.   

4 comentarios:

Anónimo dijo...

La bestia de Asdrubal Chavez, que aprovechemos el diferencial de precios y exportemos. Tamaño animal, no tiene ni la mínima idea de lo que han destruido.

Cuando empezará el éxodo de estos animales?

Anónimo dijo...

Sigue el bloqueo mediatico de Madurito y Venezuela! No son suficientemente fuertes para enfrentar la critica de la oposicion!

NTN24 bloqueado completo por web, cellulares, TV cable! Piensan abrir otros medios!

No se de AhoraVision y MiraTv dejo a Napoleon Bravo!

DTVMundo no se de su alcance tampoco!

Me imagino que muchos twitter pudieran ser bloqueados! Y otros medios sociales como en paises similares!

Lo admirable es que en facebook le puedes decir cosas pesadas an contra de Fidelito en Reflexiones de Fidel!

MADURITO me bloquea de facebook! Y no se de twitter o blogs!

Youtube seguro que tiene limitantes!

Anónimo dijo...

Cuando la represa reviente por no haberla aliviado poco a poco, se va a llevar a mucha gente al fondo. Si ahora se ve y se siente que que todo va mal, lo que viene es un trauma peor...........
Pero luego de salir de los chavistas, puede que venga la calma, despues de esta mayor inundacion.

Anónimo dijo...

Hey chavistas and chavistos, guebones todos. All of you are stupid and mostly very ugly. I can fix ugly, but I can not fix stupid.
Facial Surgeon.